Problems With Writing Bad Checks

What Happens when you Write a Bad Check

Cash and Checks
Gary Whitley/Illustration Works/Getty Images

If you write bad checks, you’re setting yourself up for trouble. You’ll end up paying a lot in fees, you’ll lose the ability to write checks in the future, you risk legal troubles, and your credit can suffer. If you’ve already written a check (or are thinking about it), find out what you’re getting yourself into – and what you can do about it.

If you’ve received a rubber check, see How Returned Checks Work.

You’ll find out what caused the problem, how to solve it, and how to prevent it in the future.

What is a Bad Check?

A bad check is a check that your bank does not pay on. When you write a check, the payee (the person, business, or organization that you’re paying) will deposit the check to their bank account or try to cash it. The check will then be sent to your bank – possibly very quickly if it’s converted to an electronic check – and your bank will check to see if you have that money available in your account.

If you don’t have the funds available, you’ve written a bad check. Sometimes this is intentional: you know you don’t have the money, but you write the check anyway (which is a bad idea). In other cases, it’s an accident (you thought you had the money available):

  • A payment that you expected (like direct deposit from your job) did not hit your account
  • A deposit or payment has not yet cleared in your account
  • Using your debit card created a hold in your account (for more than you really spent)
  • Somebody deposited a check that you wrote long ago but forgot about

Whether it happens on purpose or by accident, the results are generally the same (assuming you don’t make a habit out of it). So, what happens if you write a bad check?

Fees and Expenses

Bad checks can cost you money that you don’t have.

You almost always have to pay a fee to a business you wrote the check to (typically around $25). In addition, that business may refuse to take your checks going forward. Your bank also charges fees for bad checks. They will return the check to a business unpaid, and ding you with a bounced check fee (often around $35 or so).

However, your bank might decide to pay the check as a “courtesy” and charge overdraft fees (again, often around $35, or they may call it a loan and charge you interest). Learn more about How Overdraft Protection Plans Work.

If you’re keeping count, you’re now paying at least two fees. There’s also a good chance that your payment (whatever you wrote the check for) will be considered “late,” so you might end up paying late penalties as well.

Bad Check Databases

Another risk is that you’ll end up in a database of people who write bad checks. Banks won’t allow you to open a checking account, and some merchants might not accept checks from you. ChexSystems is just one company that tracks bad checks, usually for financial institutions. Retailers also use check verification services to find out if they should let you write a check (before they let you walk out with merchandise).

Is it Illegal?

Writing bad checks can be a felony. Each state has different laws, limits, and procedures, but you should know that you can end up in jail for writing bad checks. It probably won’t happen if you accidentally bounce a check or two, but repeated incidents (and “biggies”) can be a problem. After that you still may have to deal with legal fees, mandatory education programs, and a tarnished criminal record.

For more details, see I Bounced a Check. Now What?

How Bad Checks Affect Credit

Bad checks don’t show up on your traditional credit reports. However, companies like ChexSystems keep a record of your banking activity.

If you do not have a solid credit history (because you’ve never built up your credit), lenders, employers, and insurers may look at “alternative” credit rating agencies to decide whether or not to do business with you.

Those agencies may include information about bad checks, which will hurt your chances.

Finally, a business that you write bad checks to might send your account to a collection agency. If that agency reports activity to the major credit bureaus, your traditional credit scores will suffer.

How to Stop Writing Bad Checks

If you’re bouncing checks, take steps to avoid all of the problems listed above.

Keep track of how much you have available in your checking account (and remember that there’s a difference between your account balance and your available balance). It’s easy to find your balance if you login online or use an app on your mobile device. For a quick account check, text messages can be very powerful.

Balance your checking account so that you know how much you have now, and how much you’ll have tomorrow. There are several ways to balance your account – pick the one that works best for you.

Finally, keep a little bit of extra cash in your account as a buffer. Mistakes happen, and sometimes an extra $10 or $20 can help you avoid fees and headaches.

You can also use different tools for payment. If you spend with cash, you always know what you can afford. Of course, cash isn't always safe or practical. Debit cards are another good option for spending the money from your checking account.